RBI Leaves Repo Rate Unchanged At 5.25%; Inflation Seen At 5.1% In FY27

New Delhi, Jun 5 (KNN) The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday unanimously decided to keep the policy repo rate unchanged at 5.25 percent, while retaining a neutral monetary policy stance.

The decision was taken during the 61st MPC meeting held from June 3 to 5, 2026, under the chairmanship of RBI Governor Sanjay Malhotra. All six members of the committee participated in the meeting.

Consequently, the standing deposit facility (SDF) rate remains at 5.00 percent, while the marginal standing facility (MSF) rate and the Bank Rate stay unchanged at 5.50 percent.

The MPC said the decision was based on a detailed assessment of evolving macroeconomic and financial conditions, alongside global and domestic growth-inflation dynamics.

Global environment under pressure
The committee noted that the prolonged conflict in West Asia has intensified risks to both inflation and growth, with volatile energy markets, rising commodity prices, and tightening financial conditions.

It observed that crude oil prices remain elevated amid declining reserves, while global central banks are increasingly cautious, with some expected to adopt tighter monetary stances. Equity markets continue to be supported by artificial intelligence-led optimism, even as sovereign bond yields rise on fiscal concerns.

Domestic activity remains resilient
On the domestic front, the MPC said economic activity has remained broadly stable despite external shocks. Private consumption has stayed resilient, while investment activity has continued to grow, supported by capacity utilisation, credit flows, and government capital expenditure.

Merchandise exports posted strong growth in April 2026, although higher freight and insurance costs continue to weigh on competitiveness. Services exports remained robust.

However, the MPC noted early signs of moderation in some sectors, with external spillovers beginning to show gradual impact.

Growth outlook
The RBI projected India’s real GDP growth for 2026-27 at 6.6 percent, with quarterly projections of 6.6 percent in Q1, 6.3 percent in Q2, 6.5 percent in Q3 and 6.8 percent in Q4.

It said risks to growth stem from prolonged global supply disruptions, volatile financial markets and adverse weather conditions, including expectations of a deficient south-west monsoon. 

However, government initiatives in agriculture, gas supply diversification, and infrastructure spending are expected to provide support.

Inflation outlook
Headline CPI inflation edged up to 3.4 percent in March and 3.5 percent in April 2026, mainly due to higher food prices, while core inflation remained steady at 3.7 percent during January–April.

The MPC noted that rising retail fuel prices and global energy pressures could increase inflation in the coming months through both direct and indirect effects. For 2026–27, CPI inflation is projected at 5.1 percent, with inflation expected to peak at 5.9 percent in Q3.

Policy stance
The committee noted that although external shocks have heightened inflation risks, domestic price pressures remain broadly contained and economic growth continues to be stable. However, uncertainty surrounding global developments and the monsoon outlook calls for caution.

Accordingly, the MPC decided to keep the policy rate and neutral stance unchanged, stressing a data-driven approach and close monitoring of inflation and supply-side risks. 

The RBI expects the impact of current supply shocks to ease from Q4, while continuing to assess risks to growth and price stability.

(KNN Bureau)